Sale of PCGS assets very confusing?

GOLDSAINT

In the March 8th edition of Coin World there is an interesting article on the sale of assets by PCGS. This article is very confusing. Either the writer has no idea how to report the sales and earnings, or the information he received was all-wrong. In any case I am very confused how a big company like PCGS can loss so much money in such a hot market?

First if Heritage can do $30,000,000 plus at the one Fun show and charge buyers premium of 15% why was it that Mr. Bower’s could not do that when he was there? Heritages gross profit from that one sale was $4,000,000.

According to CW article Collectors Universe paid $16,750,00 for Bowers & Merena in March of 2000 and just sold it for $2,500,000. Does this make any since in the White Hot market of the last few years?

The article also says that they are concentrating on the grading business and selling off
Their David Hall coin business and Odyssey auctions next. They have already sold their Currency business.

In the entire article there was no mention of NGC, is that not still owned by the company?

Here is a very confusing part of the article,

“ Income from the authentication grading segment increased to $304,000 in the second quarter of FY 2004, from 130,000 in the same quarter of FY 2003. The firm’s fiscal year runs from July 1 to June 30.”

“ According to CU news release, “net revenues from the authentication – grading business increased by 40 percent to $5.8 Million in the second quarter of FY 2004, up from $4.1 Million in the corresponding quarter in FY 2003.”

Well one of you business geniuses will have to tell me what the difference is in those two statements?
The article also said that the coin commerce side had a loss of $782,000 in the second quarter of 2004, again how can that be? Just think if the market was lousy?

MICHAELDIXON

In the entire article there was no mention of NGC, is that not still owned by the company?
.
NGC was never owned by PCGS.

KollectorKing

Income is profit or what the company earned after all expenses on the authentication segment of their business.

Net revenue is total fees paid for authentication of coins, etc.


They're apples and escargots.

GOLDSAINT

Michael, I thought that NGC was also owned by CU? Then why does NGC allow PCGS coins in their registry if they are competitors?

Kollectorking, so what you are tell me is that they charged customers $5,800.000 in fees for grading but only made a profit of $304,000 in that quarter? This is about 5%. How many quarters will it take to make up the
$14,250,000 loss they just took on this sale? Dont answer that, it will take 47 quarters or 12 years at this current rate, not good if you are correct.

KollectorKing

GOLDSAINT -
CU operates several segments of business. Authenication is just one segment, and it appears that it is making money. It's the other segments that are bleeding or causing the losses, hence, they're divesting them. Does that make cents

GOLDSAINT

Kollectorking, Yes I understand that they are loseing money on their auctions etc. and must have been for the last few years. I dont really know how that is possible, since they can grade their own auction coins, even do overnight for big sales. They could I guess do this at cost since one part of the business is helping another part.
I would assume that all of their auctioned coins should have recieved the very best attention, non of this 10 second grading, for really high quality coins, etc. Naturally they would have no return shipping and Insurance to themselves for auctions, and their reputation should have brought them the best coins in the world to sell. What about 'FREE SLABING WITH PCGS" if you auction your coins with us.

I have no personal concern about PCGS, I have very few of their slabs, and my 300 plus coin collection goes to NGC right after Baltimore, mainly because my registry sets are there, but companies do go out of business, some companies like Worldtron go out of business not because they did not make money in their cores businesses but because they bleed to death from bad acquistions. What happens to your shareholders confidence when you sell off all the acquistions you made for millions of dollars and it takes you two decades to recover those losses from new earnings.
Perhaps I missed the point of this articule, but if these numbers are correct these are pitiful earnings for the number one product in their catagory. I know a small businessman with a couple of Mexican reasturants in Texas making more than $1,200,000 per year.

Conder101

First it is CU selling assets not PCGS

Second each company owned by CU is its own seperate business. If B&M wants coins graded for their auction they pay for it just like others do. They might get a better rate but it wasn't free. And until recently B&M was located in New Hampshire and PCGS was located in California so they DID have shipping and insurance both ways.

As for the loss on the sale of B&M we look at the 16.7 million dollar purchase. Eight million of that was in cash the rest was in CU stock. Now of the B&M company Bowers is gone as are almost all of the important people who built B&M's reputation. As such the company was a shell of what it once was. Naturally the value of the company fell.

As for a 5% net profit per quarter, well I guess you've never run a business because that doesn't strike me as being that bad a return.

And why does NGC allow PCGS slabbed coins in their registry if they are competitors, its because they aren't afraid of PCGS and accept them because they don't want to restrist their customers.

tradedollarnut

And why does NGC allow PCGS slabbed coins in their registry if they are competitors, its because they aren't afraid of PCGS and accept them because they don't want to restrist their customers.

Well, I agreed with you up til this statement....

Steve

goldsaint, pardon me but you sound like you have no idea about how businesses are run and how they are financially reported. I would suggest you get some education on this subject. Steve

oreville

Goldsaint: CLCT sold B&M and the other companies (exclusive of DHRC) for a lot more than the $2+ million that was reported by CW. In fact, their article is totally misleading. Included in that sale was the fact that CLCT kept all of the accounts receivable and inventory proceeds which could total as much as $8 to $10 million dollars. So from strictly a cash pont of view, they did not lose much in the way of cash at all in comparing the purchase of these companies versus their sale. As far as the stock paid to Dave Bowers, that is another story altogether.

CLCT did dilute their stockholdings as a result of buying and then selling these divisions, and from that perspective, the deal did not work out well. But it appears that CLCT was looking at B&M as a "sunk" cost and it was hurting their bottom line. How they got to this point is the topic of another thread but it took very positive and bold thinking for the management to rid themselves of the commerce divisions of CLCT. They have solved the issue of perceived conflicts that had dogged them for years.

I indicated that stockholders like myself are celebrating this latest moves by CLCT in which I boldly predicted that CLCT stock will rise by 50% in one year or less, strictly because of these moves. In fact, the stock prices have already moved up over 20% in this short period of time.

roadrunner

It seems like that many people....and well-intentioned companies...actually knew very little about running companies in the 1990's and early 2000's. The concept of growing at all costs has killed or stunted numerous firms.....CU included. The same concept has spread to average consumers to consume and buy at all costs.
Everyone has seemed to have forgotten how to run a business or how to run the family finances.

roadrunner

GOLDSAINT

Oreville, I am sure you are correct on your points and Cu is much better off without these divisions. What it looks like is Coin World just did a bad job of reporting the story many of the points you, kollectorking, roadrunner and condor made were not brought out in the CW story. I am sure these big name executives demand high salaries, expense accounts, offices etc. as part of their acquisition price. CW could have pointed out how much CU would now be saving hundreds of thousands each year in overhead etc. which appears to be the cause of their loses. In the high flying stock days of the last few years it is easy to see that lots of deals could have been made to run the overhead through the roof thinking this would never end, and trading “ paper” shares in the company for hard assets always looks like “money for nothing and coins for free”, but it is the overhead commitments that kill you if the market turns soft, gentlemen like Bowers had to be high maintenance. Contrary to my other statements this looks like a very smart and gutsy move on the CU managements part, I am just not sure I would get out of the auction business. Perhaps now that CU has sold off the brands and relieved themselves of the overhead and additional salary problems they will open a new auction business in California?

tradedollarnut

There are currently too many auction firms - why compound the problem? When the market softens, they will begin to drop like flies!